“To remind herself that she will always upset someone with her rulings, Margrethe Vestager keeps a ceramic hand with a raised middle finger on her desk,” Christian Oliver, Tim Bradshaw, and Barney Jopson report for The Financial Times. “It was sent to her by an angry trade union during her time as economy minister of Denmark.”
“Since she became the EU’s competition enforcer in late 2014, those irate adversaries have only become more powerful,” Oliver, Bradshaw, and Jopson report. “She is now facing a showdown with the world’s richest company and most powerful government.”
“On January 21, Apple’s chief executive, Tim Cook, made a personal appeal to Ms Vestager in Brussels. His aim was to deflect her from issuing a ruling against the technology company’s tax arrangements in Ireland, suspected of saving the company billions in international tax payments. If Apple is found to have benefited from a sweetheart deal, in contravention of EU competition rules, it could have to pay back billions of euros of underpaid tax to Dublin,” Oliver, Bradshaw, and Jopson report. “According to those briefed on the meeting, it was a heated, testy encounter.”
Read more in the full article here.
MacDailyNews Take: Apple simply followed the law when paying their taxes:
There was no special deal that we cut with Ireland. We simply followed the laws in the country over the 35 years that we have been in Ireland. If the question is, was there ever a ‘quid pro quo’ that we were trying to strike with the Irish government – that was never the case. We’ve always been very transparent with the Irish government that we wanted to be a good corporate citizen… If countries change the tax laws, we will abide by the new laws and we will pay taxes according to those laws. – Apple CFO Luca Maestri
SEE ALSO:
EU’s Vestager says will not complete tax inquiries of Apple, others in second quarter – May 5, 2015
U.S. demands EU reconsider tax probes of its companies – February 12, 2016
U.S. Treasury official to meet EU antitrust team over Apple tax deals – January 29, 2016
Apple and Google stand by Europe tax deals; Rupert Murdoch weighs in – January 27, 2016
Apple could trigger global tax war, potential breakdown of the international tax system – January 27, 2016
Apple CEO Cook lobbies EU antitrust chief over Irish back taxes – January 21, 2016
Think Ireland’s corporate tax is unfair? Wave goodbye to Apple and thousands of jobs if it’s changed – November 14, 2015
Apple announces 1,000 new jobs in Ireland as EU tax ruling nears – November 11, 2015
Apple tax probe won’t hurt Ireland, Finance Minister Noonan says – October 5, 2015
EU’s Vestager says will not complete tax inquiries of Apple, others in second quarter – May 5, 2015
Apple warns of potential ‘material’ financial damage from European tax probe – April 29, 2015
Apple may have to pay Ireland 10 years of back taxes – April 30, 2015
EU’s plans to tackle corporate tax avoidance hits first roadblocks — February 12, 2015
Ireland’s Prime Minister: Apple has nothing to fear from end of ‘Double Irish’ tax avoidance strategy – November 4, 2014
It’s a very interesting issue. Ignorance of a law has never been a defense to a breach of that law. Apple paid taxes according to Ireland’s law; but if Ireland’s law was in contravention of EU law, Apple’s ignorance of that fact would not be a defense. Apple could argue it relied on Ireland’s law, but I doubt that Apple will garner much sympathy here – many EU countries are still struggling mightily from the recession having implemented “severe austerity” type measures. The US has recovered much faster, and Apple is one of the most successful companies in the world. It will be seen as getting even richer off the backs of smaller European companies who were at a competitive disadvantage by having to pay higher taxes. While fining Apple might not be seen as appropriate by the Euro court, simply paying back taxes with interest might be. This could be ugly.
Depends what you mean by recovered, the US’s national debt has increased from $10.6 Trillion to $18 Trillion since Obama came into office. Or put another way in 2008 US National debt was 60% of it’s GDP now it’s 105% of GDP. So if recovery is based on borrowing more than is earned per annum then the US is indeed the biggest success story on the planet.
You miss a lot of points, lastword. Obama was handed the worst recession in a hundred years. Debt as a percentage of GDP grew far more under Bush Jr. than under Obama – about 28% under Bush, a little over 19% under Obama. Even under Reagan it grew 19% and under Bush Sr. around 14%. Also, in Q4 of 2008 debt was 74% of GDP, not the 60% you quote (the last time it was 60% was in 2005).
You also have to remember that all non-partisan economists agree that the biggest part of the deficit is still the unfunded Bush tax cuts – and will be until around 2019. The second biggest part is still the two wars Bush started but didn’t fund. The cost of the economic bailout is a fraction of those two financial disasters. The non-partisan Center on Budget and Policy Priorities estimates the effect on the deficit between 2009 and 2019 caused by the stimulus as $1.7 trillion. That compares with the $6 trillion cost of Bush’s tax cuts and wars for the same period.
Furthermore, I said that the US has recovered better than much of Europe – and that is undeniable. A number of European countries still have unemployment numbers in the 20% range and economic “growth” around zero (an improvement from the negatives of the last several years but way behind US growth of 2 – 2.5%. “Severe austerity” was a cruel hoax as an economic plan to recover from deep recession.
But all of that is off point. My post was about Apple’s probable ignorance of EU laws, the fact that ignorance is no excuse, and that Apple will be seen as a very rich US company trying to get out of paying taxes that poorer and smaller local companies had to pay for years.
Are you comparing apples and oranges perhaps? Can’t imagine how going from $10 trillion to $18 trillion is just a 19% increase…unless you’re talking about a 19% increase per year not in total. The other thing you obfuscate by throwing in numbers from Reagan and Bush senior etc is that the percent growth from those Presidents is from a smaller base and are much smaller in absolute and in relative terms. You cannot equivocate by trying to compare only on a percentage basis. Debt as a proportion of the economy has not been this high in the lifetimes of just about anyone alive today. We’re light-years away from normal right now.
Pay your taxes, beleaguered Apple.
They did pay their taxes. They paid every penny that the Government of Ireland or any other individual national government asked them to pay. They did not try to pull a fast one. They asked each of those governments how much the company owed, and then paid it. The issue is whether the governments got it wrong because they (the governments, not Apple) were trying to get an unfair advantage over other European countries and violated their treaty obligations in the process.
The anti-government types on this website generally claim that this dispute is about governments trying to extort money out of Apple to line their pockets. Actually, if the European Union wins this fight, it will not get a single Euro in direct benefits. All the millions or billions that Apple will owe in “unpaid taxes” will go to the Republic of Ireland… which DOES NOT WANT THE MONEY.
Their tax deal with Apple was signed because Ireland thought it was in their citizens’ best interest. They calculated that foregoing that revenue in the short term would pay much greater long-term benefits to their national economy. If they were not correct in that, it could not be unfair competition with other countries, could it? What’s good for Ireland may be bad for other members of the EU.
However, it isn’t Apple’s obligation to construe European treaties. It is their obligation to pay what the national governments ask them to pay, and they have done that. Their problem is that if the Irish Government got it wrong, the shortfall will not come out of the Irish treasury (it will, in fact, go INTO the Irish treasury) but out of Apple’s overseas reserves.
AMEN. Since when does Apple need to integrate taxpayer pillage into its business plan? This is an immoral act on their part. And don’t buy the whole “tax holiday” argument. That is nothing but blackmail.
Apple gets bitch slapped. How ironic. After Apple’s corporate support of left leaning policies it now feels the all consuming wrath of progressive governments to extract, extort, and compell Apple to hand over their profits. Ah, too bad, Apple.
The pharmaceutical industry, for one, has been parking profits in Ireland for decades. The EU is full of shit if they pretend they did not know the sweetheart deals Ireland was offering companies to bring business to Ireland.
The issue is much bigger than Apple or any tech business. It just so happens that the best way to “park profits” in a country like Ireland is to have high value but (relatively) low volume products pass through the place. Like pharmaceutical chemicals. Or patents — just assign the patent right to a holding company in Ireland, and take a sweet markup there, too.
It has been going on for decades. Sorry, EU, you cannot play dumb on this one.
The issue here is the EU regulators seem be claiming that Apple got a one of a kind deal with Ireland that Ireland has not (and would not) give to any other company. If this were true, then it would be contrary to the Irish government’s agreements with the EU as a whole. This would require Ireland to abrogate that agreement with Apple and require Apple to pay back taxes or Ireland could be held accountable by the EU (something Ireland can’t afford to do).
Apple’s claims is that it made no such deal with Ireland and that any tax deal it got with Ireland could be duplicated with any other company.
Also, Apple explicitly refutes any implication that Apple agreed to specific offers to the Irish government to get an Apple only deal (the quid pro quo reference by Maestri). IF the EU regulators can prove that there was such an action by Apple, then the EU itself might be able to fine Apple.
However, from everything I’ve read about this situation over the years, it appears as though Apple is in the clear on this one. Apple didn’t force an Apple only agreement. Apple didn’t offer inappropriate inducements to Ireland for an Apple only deal. In fact, there’s a long track record of Ireland making similar deals with many other companies–many of them also “tech” companies.
The EU regulators should provide *explicit* proof to the contrary or just shut up and go away.
When existing “laws” are already sweetheart deals, there is no reason to offer “one-of-a-kind” special deals.
Apple likely got the same deal everyone else did, including Google, etc. The laws and tax rules are a matter of record. However, due to its sheer size, the benefits to Apple may have been relatively greater than for other companies. Same laws, same application, but bigger result for Apple. Still, that is no crime.
The unbelievably sweet Irish corporate tax laws have been in place for decades. I am surprised the EU has not called them out years ago for “beggaring their EU neighbors” (…after getting _a lot_ of “development funds” when the EU was created). I am also surprised the US IRS has not called Ireland out for aiding and abetting tax avoidance, the same way they called out the Swiss banks.
There is a big difference between changing the rules going forward versus retroactively applying different rules. Apple has had business engagements with Ireland for 35+ years. The modern version of the EU was formed on November 1, 1993, or 23 years ago. I don’t know how long Ireland’s current business tax structure has been in place.
My point is that the EU has had many years to assess the various tax policies of its member countries. In my opinion, if you do not choose to investigate or enforce policies for many years – tax policies that apply to the countries – then it is wrong to decide many years later that those policies violated the rules and that back taxes are due from the companies that legally complied with the rules that were in place. One of the issues is that Apple cannot apply revisionist history to its own corporate policies and decisions in response to this retroactive adjustment to EU taxation. If this issue had been raised in 1993, for instance, Apple may have chose to invest elsewhere over the past couple of decades. Instead, the EU and Ireland reap the benefits of those decades of business investment, but want to retroactively penalize Apple to extract more money. It takes time to investigate such issues and make a decision, so I might be OK with a three to five year statute of limitations for retroactive taxation in such a situation. But the potential liability must be bounded by law and reason.
If countries can go back into history and change anything that they want and then apply the effects retroactively for long periods of time, then there is nothing that we can count on. I cannot take such an action as an individual person/citizen, and I am not willing to cede that right to the government, either.
KingMel: you say “If countries can go back into history and change anything that they want and then apply the effects retroactively for long periods of time, then there is nothing that we can count on. I cannot take such an action as an individual person/citizen, and I am not willing to cede that right to the government, either.” But that’s not what is happening.
When the EU was formed, the member nations made rules and agreements that they were all supposed to follow. Countries who joined later also had to agree to abide by the EU rules. Those rules included strict agreements about not giving sweetheart tax deals to some companies and not to others. Ireland isn’t changing its tax laws voluntarily; however those laws don’t meet the EU’s rules and never did. For sure Apple has a defense that it complied with Ireland’s laws; however, those laws themselves were illegal. It’s a tough argument to make that the richest company on earth shouldn’t pay the back taxes it should have paid had it (and Ireland) complied with existing EU laws.
Not if Ireland’s laws and agreements were in affect before the EU was formed.
“Ireland isn’t changing its tax laws voluntarily; however those laws don’t meet the EU’s rules and never did.”
Which laws? Which ‘rules’? And how long is never? If you actually know what you are writing about you are not making it clear with this post. Spell out the detail, and then everyone can see the arbitrary, hypocritical, opportunistic chicanery of the way these ‘competition rules’ are being used to strong-arm easy targets.
Try applying them to some european industries, Margrethe. Mercedes or BMW, for example. How about the flagrant abuse by Alitalia? The French creation of ‘world champions’ that spit on these rules? Wine industry protection, farming subsidies that ruin third world farmers (you too, America), fishing quotas designed to enrich economies that ‘need’ it and not protect fishing stocks? How about the Dutch not charging capital gains tax, uniquely? And on, and on, and on.
No. Don’t be fair, take a pop at a popular target. And for you Americans reading this: be aware how much they hate you.
Folks, “sweetheart” corporate tax rates in Ireland existed even before the EU was formed.
There is no need to debate facts.
Ahhh, the smell of money! Especially free money from a well to do company.